THE CLARK TAX CUT….Wes Clark unveiled his new tax proposal yesterday and it looks pretty good, both substantively and politically. Roughly speaking, it eliminates federal income tax for all families with incomes under $50,000, reduces taxes for all families with incomes under $100,000, and makes up the difference by increasing the tax rate on income over $1 million per year by 5 percentage points. In addition, it simplifies and expands the current set of tax credits for children. Details are here.
My sister will hate it. She’s constantly kvetching ? and reasonably so ? that politicians are forever pandering to families but never offer anything to single people. Clark’s plan follows in that rich tradition.
It’s a clear and straightforward attempt to add some more progressivity to the tax code. I like that. We really need to have a serious public conversation in this country about the value of a progressive tax system and Clark’s plan is a good way to do that.
Keep in mind that the 5% increase is only for income over $1 million, not on the first $1 million itself. The super rich have seen their pay increase by over 5x in the past couple of decades while their marginal tax rates have decreased by about 50%. Surely someone whose income has gone up from $1 million to $5 million can afford to give back a bit of that? This is a case we ought to be able to make.
There’s another sense, however, in which Clark’s plan is profoundly conservative. In today’s dollars, the very first income tax was levied only on people who earned over $60,000, with a surcharge on income over $10 million. The federal income tax was originally conceived as a tax on the well off and the wealthy, not the working class.
The total amount of money involved is apparently fairly small: $30 billion in savings to middle class families offset by $30 billion in extra taxes on millionaires.
The plan is revenue neutral. For a presidential campaign this is the right way to go, but eventually we’re going to have to face up to the necessity of either raising taxes or running deficits forever. Big government just isn’t going to go away, no matter how loudly conservatives pretend that they want it to.
There’s one sense in which I wish that we spent less time obsessing about income tax plans, since it’s payroll taxes and sales taxes that actually make up most of the burden on working class and middle class families. What I’d really like to see is a proposal to make the Social Security tax progressive ? or even just making it flat as a starting point. But that’s an argument for another day. For now, Clark’s plan is a very good one: simple, easy, and fair. I hope people listen to it.